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Former Sotheby's CEO Pleads
Guilty to Violating Antitrust Laws

By

Vanessa O'ConnellStaff Reporter of The Wall Street Journal

Updated Oct. 6, 2000 3:47 a.m. ET

NEW YORK -- Blaming her onetime boss, real-estate magnate A. Alfred Taubman, for her woes, Diana D. Brooks, the former president and chief executive of
Sotheby's Holdings Inc.,
pleaded guilty to conspiring to violate antitrust laws.

The guilty plea by Ms. Brooks, 50 years old, brings to an end a career that had made her the most powerful woman in the international art world. Ms. Brooks now faces as much as three years in prison and fines that could total hundreds of thousands of dollars. Her sentencing on the felony count is scheduled for Jan. 5.

Flanked by her two lawyers and dressed in a conservative black skirt suit, Ms. Brooks told U.S. District Judge Richard Berman that her decision to carry out a price-fixing scheme, said by the government to have lasted more than six years, wasn't her own. "At the direction of a superior at Sotheby's Holdings, I had a number of meetings with a representative of Christie's in which, among other things, I agreed to fix prices with respect to commissions charged to sellers" during the period from April 1993 to December 1999.

At the time, her only superior was Mr. Taubman, and her lawyers confirmed that this was the person to whom she was referring in her statement.

Little more than an hour before Judge Berman accepted Ms. Brooks's guilty plea, another federal judge delayed a resolution of price-fixing allegations against Sotheby's, saying he needed two months to weigh the auction house's proposed guilty plea and determine whether victims of the price-fixing scheme would be adequately compensated.

Sotheby's Ex-CEO Diana Brooks to Cooperate With Prosecutors (Oct. 5)

U.S. District Judge Lewis Kaplan said he wanted to consider the carefully crafted plea agreement that lawyers for Sotheby's and Justice Department prosecutors have spent much of the last year negotiating. In a 45-minute hearing Thursday, the judge said he was concerned about a provision in the pact that prohibits the government from seeking restitution on behalf of victims of the scheme.

Under the terms of the deal, Sotheby's would plead guilty to a single felony count of conspiring to fix prices with rival Christie's International. It also agreed to pay a $45 million criminal fine over five years.

John J. Greene, an antitrust prosecutor on the case, unsuccessfully sought to keep terms of the Sotheby's plea agreement under wraps Thursday because "a second individual is still under investigation." That individual is Mr. Taubman, Sotheby's controlling shareholder and former chairman, according to people involved in the case.

U.S. Agreement

Under the terms of that 11-page agreement, made public late Thursday, the government agreed not to bring criminal charges related to price-fixing against any current or former director, officer, or employee of Sotheby's other than Ms. Brooks and Mr. Taubman, whom the government named in the agreement.

Mr. Taubman said in a statement, "Whatever Ms. Brooks chose to do, she did on her own, without my knowledge or approval." He added that "if the need arises, I will defend myself vigorously against any charges."

Terms of Ms. Brooks's plea agreement call for her to cooperate fully with the government's continuing investigation of Mr. Taubman. Ms. Brooks would also be required to testify against Mr. Taubman in the event of a trial. Mr. Taubman hasn't yet been charged with wrongdoing.

Lawyers for the Yale-educated Ms. Brooks, who once sat on such corporate boards as those of
Morgan Stanley Dean Witter Inc.
and Sotheby's, unsuccessfully sought a plea deal that would ensure she wouldn't spend any time in prison. Although, in the end, prosecutors refused such an agreement, they did agree to submit a letter as part of the sentencing report that will be prepared for Ms. Brooks, recommending she get considerably less time than would otherwise be mandated by federal sentencing guidelines, according to individuals with knowledge of the agreement.

Even as Judge Berman advised Ms. Brooks that the discretion in sentencing would be his alone, and that she couldn't withdraw her plea if she didn't like the sentence he might issue, she said she understood and still thought it in her best interest to plead guilty.

Ms. Brooks stood tall, hands clasped behind her back, between John Siffert and Stephen Kaufman, the lawyers she retained early this year, after Christie's gave the Justice Department the documents it used to make its case.

Promise by Justice Agency

The Justice Department promised not to prosecute Christie's and its former chief executive, Christopher Davidge, in exchange for their cooperation in an investigation that began more than three years ago. Christie's shocked the art world in January by announcing its deal with prosecutors.

Judge Kaplan's decision to defer acceptance or rejection of the plea agreement wasn't unexpected, Sotheby's lawyers said. In most cases, federal judges have the discretion to mete out punishment. But in this instance, Sotheby's and the government reached what is known as a "C-deal."

Such pacts, which are considered to be unusual in federal court here, don't give the judge any option but to accept or reject the previously agreed-to fine, in this instance $45 million. The judge must agree that this fine is the "appropriate disposition of the case," the federal criminal code says.

"We were prepared to go ahead with sentencing today, but we knew it was highly unlikely," said Steven Reiss, the lead outside counsel for Sotheby's.

Justice Department officials characterized the delay as common in cases like this one. "In fact, what would have been unusual is if the judge accepted the plea today," one high ranking official said.

Sotheby's financial condition and the possible harm that was done to the victims will be among the issues the judge examines in trying to determine if the $45 million fine is adequate, the official said. According to court papers, Sotheby's revenues from sellers' commissions were in excess of $225 million in the U.S. during the period in question.

Individuals with knowledge of the pact said Sotheby's sought the provision barring the government from seeking restitution because of a separate agreement it and rival Christie's reached late last month with attorneys for class action plaintiffs.

The auction houses agreed to pay $512 million to victims of the price-fixing conspiracy. Sotheby's, these people said, feared having to make additional payments to victims beyond its portion of the civil settlement. The judge said he needed to weigh the economic losses caused by the conspiracy before accepting the plea. Judge Kaplan, who is also presiding over related civil class-action litigation against both Sotheby's and Christie's, scheduled another hearing on the Sotheby's plea deal for Dec. 4.